Canadian Pacific Railway Ltd. has lost a legal battle with the federal government over grain movement amid continued strained relations between Ottawa and the country’s two largest railways.

In a ruling released Thursday, Justice J.A. Pelletier dismissed CP’s appeal of an interswitching order issued by the Canadian Transportation Agency after a price dispute over how much CP should charge Canadian grain company Parrish & Heimbeck (P&H) to move grain cars to another line that would connect to American railroad Burlington Northern and Santa Fe Railroad (BNSF) and send product south.

Interswitching lets customers limited to one railway have their product moved, for a fee, to a interchange with another rail line, provided that junction falls within the stated radius.

The dispute between P&H and CP came just months before the federal government extended the interswitching radius in Western Canada from 30km to 160km last May under the Fair Rail for Grain Farmers Act. The change, which was hotly contested by both CP and Canadian National Railway Co – was implemented in response to last winter’s grain crisis, which left millions of tonnes of grain stranded across the prairies for months.

Under the Act, both CN and CP are under federal orders to move 325,000 tonnes of grain each per week or risk fines of up to $100,000 per violation payable to the federal government.

Fines are currently pending against both railroads for failing to meet a combined three weeks of targets last summer and fall. While CN has said it will pay its $100,000 fine, CP has indicated it plans to challenge its $50,000 arguing a shut down at the Port of Vancouver for Labour Day impeded the railway’s ability to meet the weekly volume target.

When the interswitching radius was changed, CN and CP argued the new radius would lead to “poaching” by American railroads such as BNSF, which is owned by American business mogul Warren Buffett’s Berkshire Hathaway. The move, both railroads said, would also make grain even harder to move because interswitching can be cumbersome and difficult to co-ordinate.

Farm groups and the federal government, though, argued the wider radius would increase competition in a system that often sees shippers restricted to either CN or CP lines.

P&H, court documents show, had grain cars stationed at its terminal in Milk River, Alta and wanted them moved approximately 20 km south to Coutts, Alta. so they could be picked up by American BNSF.

CP, though, reportedly told P&H it would cost the Canadian grain company $1,373 per car. Under an interswitching order from the Canadian Transportation Agency, CP would only be able to change $315 per car.

The CTA granted the interswitching order on May 1, 2013, only to have CP challenge it in federal court on the basis that BNSF did not have an interchange at the Coutts rail yard.

That appeal was dismissed Thursday, with costs to P&H, after the federal court determined CP and BNSF already had an agreement at the Coutts rail yard that allowed each railway to use each other’s lines to move goods across the border.

The agreement, documents show, has been in place since 1928. It was revised in 2005 and named the Interchange Agreement. As such, the agency’s decision to extend an interswitching order, the court said, was “reasonable.”

“Once the Agency concluded that BNSF had a line of railway at the Coutts Yard, then the issues of the existence of an interchange and the availability of interswitching resolved themselves in P&H’s favour,” the ruling reads.

The decision was welcomed by the Western Canadian Wheat Growers, Monday. “The Wheat Growers are very pleased to see the Federal Court uphold the Agency decision,” the association’s president Levi Wood said in a release. “The interswitching provision introduces a modest but important element of competition in the rail sector.”

Another interswitching dispute, between Richardson International and CN, is still being handled by the courts. On Monday, Wood said he hoped last week’s ruling would set a precedent for the pending case against CN.

CP filed suit against the federal government in August, alleging the new interswitching distance would cost the company $13 million per year in operational and administrative costs. That suit was later dismissed by the Federal Court of Appeals.

A federally ordered review of Canadian rail system is ongoing. A final report is expected sometime in 2015.

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I would bet a dollar to a donut that everyone involved in this stupidity wished that they hadn’t destroyed the wheat board. These type of problems didn’t happen when the wheat board existed. Then came our best and brightest conservatives and fixed everything.